Challenge unlikely to loosen Murdoch's hold on News

RUPERT MURDOCH is set to face a challenge to his family's
control of News Corp at its annual shareholder meeting this month,
after one of the world's most powerful shareholder advisers
recommended fund managers back a move to change the company's share
structure.

Institutional Shareholder Services (ISS), which advises 2000
institutional investors globally with about a quarter of the
world's tradeable shares, recommended its clients support a
proposal to create one class of shares with equal voting
rights.

The move would abolish News's structure of voting and non-voting
shares, which has cemented the Murdoch family's control over the
media empire.

"We believe that simplified capital structures, where voting
interests are proportional to economic interests, are preferable to
dual-class structures, where management has disproportionate
control of voting stock," ISS wrote to its clients.

The recommendation came after an Australian shareholder
activist, Stephen Mayne, petitioned that the proposal be put to
shareholders at the October 19 meeting in New York, saying it
"seems inappropriate that our system of democracy is
severely gerrymandered, with almost 70 per cent of the shares on
issue not having voting rights."

News has about 54,000 holders of class A non-voting shares and
1600 holders of class B voting shares. It is one of several US
media companies with dual share structures, including the
Washington Post, aimed to deter hostile takeover bids and cement
their proprietors' influence.

Introducing one set of shares would dilute the Murdochs' control
over News from 39 per cent to less than 15 per cent.

Not surprisingly, News's board opposes the move.

"The company believes that the company's history of growth and
financial strength is due in large part to the concentration of
voting power in Mr Murdoch and his family," News said.

An ISS spokesman, Dean Paatsch, said yesterday that the petition
was "another signal for governance reform to introduce a more
shareholder-friendly culture at News Corp".

But because the vote was non-binding for News, and insiders
could prevent a majority, it was unlikely things would change, Mr
Paatsch said.